The complaint alleged that NGL tricked users into paying for subscriptions by sending them computer-generated messages that appeared to be from real people and offering a service for as much as $9.99 a week to uncover their real identities. People who signed up received only “hints” of those identities, whether they were real or not, law enforcement officials said.
After users complained about the “bait-and-switch” tactics, company executives laughed off their concerns and called them “suckers,” the FTC said in an announcement.
NGL, an internet term for “don’t lie,” agreed to pay $5 million and stop marketing to children and teens to settle the lawsuit. The lawsuit also alleged that the company violated children’s privacy laws by collecting data from people under the age of 13 without parental consent.
The settlement marks a significant milestone in the federal government’s efforts to address concerns that tech platforms are exposing children to harmful material and profiting from it. And it’s one of the most significant actions by the FTC under Chair Lina Khan, who has ramped up the agency’s tech industry oversight since taking the helm in 2021.
“We will continue to take on companies that unlawfully exploit children for profit,” Khan (D) said in a statement.
NGL co-founder Joao Figueiredo said in a statement Tuesday that the company cooperated with the FTC’s investigation for nearly two years and that he saw the “resolution as an opportunity to make NGL better than ever.”
“While we believe many of the allegations surrounding the youth of our user base are factually incorrect, we expect that the agreed-upon age restriction and other procedures will now provide direction to others in our industry and hopefully improve policy overall,” Figueiredo said.
NGL’s popularity has exploded, with a user base of over 200 million. At one point, it became the most downloaded product on Apple’s app store just a year after its launch in 2021. The platform lets users anonymously respond to questions from friends and contacts on social media, and markets itself as a place where people can play games like “never have I ever.”
It is one of a number of anonymous messaging services so widespread among young people that it has raised concerns among child safety advocates, who say the companies are failing to take adequate steps to prevent cyberbullying and other harmful activity through their products.
In October, child safety group Fairplay and parent advocate Kristin Bride filed a complaint with the FTC investigating allegations that the app’s parent company, NGL Labs, illegally marketed itself to children using unfair and deceptive business practices.
Bride’s 16-year-old son, Carson, committed suicide in 2020 after being cyberbullied on two separate anonymous messaging services, Yolo and LMK. Bride has said Carson’s last search on his phone was to track down who was anonymously harassing him online.
“It was extremely disturbing to learn that a new anonymous app, NGL, had entered the market and had found a way to further monetize their dangerous product by tricking vulnerable teenagers into paying for useless hints about who was sending them the messages,” Bride said in a statement last year.
The agency added that it has received “invaluable assistance from Fairplay and social media reform advocate Kristin Bride” in the case.
Haley Hinkle, policy counsel at Fairplay, said Tuesday that the FTC’s move “demonstrates once again that tech companies are being held accountable for their obligations to children and teens.”
As part of the deal, NGL will be required to ban users from the app who indicate they are under 18 and to delete any data it has collected from young children unless a parent gives permission. The company will also be barred from making misrepresentations about its ability to filter out cyberbullying or about the sender of messages on its app.
While the settlement is limited to one company, it is one of the FTC’s strongest actions to better protect children online under Khan.
The agency unanimously approved the settlement in a 5-0 vote, with both of the FTC’s new Republican commissioners joining Khan and other Democrats. The vote is emblematic of the bipartisan concern for children’s online safety in Washington.
In a statement, GOP Commissioner Melissa Holyoak said NGL “engaged in truly despicable conduct” by “harassing” “tweens and teens” into paying subscriptions. Holyoak criticized NGL for luring young users with messages allegedly posted by their friends, including phrases like “Are you straight?” and “I know what you did.”
Andrew Ferguson, the agency’s other Republican, said he supported the agreement “unreservedly” and called it a “novel” approach to the agency’s enforcement of child safety online. But Ferguson said he did not believe federal law “categorically prohibits the marketing of anonymous messaging apps to teens.”
The agency last year reached a record $520 million settlement with Epic Games, maker of the popular video game series “Fortnite,” over allegations that the company violated children’s data protection laws and tricked players into making unwanted purchases. But the settlement did not include a ban on marketing to people under 18.
The FTC has separately proposed a sweeping plan to ban Facebook and Instagram parent Meta from monetizing the data of children and teens under 18, but the plan has yet to be implemented pending a series of legal challenges from the tech giant. The agency cast the restrictions as an update to its landmark $5 billion privacy settlement with the company.
The FTC is also considering expanding enforcement of the landmark Children’s Online Privacy Protection Act. Under the proposed rules, platforms would be required to disable targeted advertising to children under 13 by default.